A wave of disappointment took over the country’s traders, businessmen and industrialists as the Federal Finance Minister Dr Abdul Hafeez Shaikh unveiled an “incomplete” Rs2.767 trillion Federal Budget 2011-12 Friday, in a manner that the traders claimed was typically “political”.
Most of the commentators from trade and industry kept their cards close to their chest owing to what they called an ‘incomplete’ budget speech, delivered hastily by the federal finance minister amid an earsplitting pandemonium created by opposition parties led by PML-N in the lower house. An incomplete budget speech, the traders and industrialists complained, had rendered them unable to analyse the new fiscal plan comprehensively as well as on merit.
However, in their initial reaction, the representatives from Federation of Pakistan Chamber of Commerce and Industry (FPCCI), Karachi Chamber of Commerce and Industry (KCCI), Alliance of Market Associations (AMA) and ports and shipping industry came up with a mixed response terming the fiscal document as “status quo”, “normal”, “balanced” and “more of the same”.
The traders also slammed the government for allocating a meager Rs6.4 billion for law and order, given its poor state in the terrorism-hit country where, according to them, special attention should have been given to efforts that could help maintain peace. While observing no “drastic” measures taken in the new budget, the traders, industrialists and businessmen lauded steps such as the removal of regulatory duty on 392 items, 2.5 percent Special Excise Duty, one percent cut in general sales tax and a price rise for cigarettes.
“It was a normal budget in a time of prevailing crisis in which, apparently, no measures have been taken for the industry,” Vice President FPCCI Khalid Tawab, told Pakistan Today. The FPCCI vice president said the economic managers seemed to have rejected the industrialists’ proposal for the removal of sales tax on machinery. “In a presentation to FBR (Federal Board of Revenue), we had proposed the removal of sales tax on machinery which crippled the growth throughout last year, but no attention was paid to our requests,” Tawab said.
The FPCCI office bearer said a detailed version of the federation would be issued after it held a meeting on Saturday. KCCI President Syed Shafique was also uncertain about details of the semi-concealed budget that he said had failed to bring the widely expected “revolutionary changes” for the benefit of general masses. Appreciative of the apparent relaxations in various duties and taxes, the KCCI chief said the Rs6.4 billion allocation for law and order was not enough.
“The allocated Rs6.4 billion for basic problems such as law and order are very insufficient, given the current situation,” Shafique said. The KCCI chief said it was yet to be seen how the government would achieve its “ambitious” targets, including bringing 0.7 million new taxpayers under the tax net and bridging Rs850 billion fiscal deficit. He said the budget makers had not touched the zero-rated sector, but there were indications that the budgeters would do away with the long-disputed 17 percent tax on local sales. About budget speech, the trader said “political governments always present budget speeches in a political manner.”
The small traders came up with a harsher view of the budget with Chairman Alliance of Market Associations (AMA) Atique Mir criticising the document as being “disappointing” and “a bundle of figures”. “The incomplete and disappointing budget was presented purely in a political manner and only pleasant aspects were highlighted,” Mir said.
The AMA chief said no “formula” which could address the basic problems of the traders was announced, including the prominent was announced to address the traders’ basic problems, most prominently the energy crisis which hindered growth.
A ports and shipping expert Muhammad A Rajpar used words such as “more of the same” and “to be continued” for the new budget that the businessman believed had no “surprises,” thanks to an “efficient” media that had broken many of the budget items a couple of days earlier. The expert said reducing GST by one percent and broadening the tax base were fruitful measures but the government would have to ensure administrative efforts to make new taxpayers contribute their share.
To Rajpar, the 4 percent fiscal deficit target was “ambitious” given the ongoing high rate of double-digit inflation and other macroeconomic indicators which were depicting deterioration. “There was no mention of issues related to the public and energy sector like circular debt in the budget that the minister might have skipped in his speech,” the expert said. The brokers at Karachi Stock Exchange (KSE) termed the budget as “pathetic.” “There is nothing for the relief of common man or the investors in this budget to the best of my knowledge,” said Muhammad Yasin Lakhani.
Being highly critical of the parliamentarians’ “bizarre” behavior during the budget speech, the senior broker sarcastically said such “revolutionary” budgets were going to lead the country to a bloody revolution. In its comments, Topline Research, observed that the much-awaited relaxation on Capital Gain Tax (CGT) was not mentioned in the Finance Bill issued as a part of the Federal Budget FY12. “After the recent round of meetings with Ministry of Finance and FBR, it was expected that CGT may be deferred at least for the individual investors who have been deserting the market, causing volumes in FY11 to decline to an 8-year low of Rs 4 billion a day, going down by 50 percent from values of the last year,” it said.
This, it warned, would not only affect the market depth and volumes but would also have adverse implications to the government plan to privatise its units through the stock market.
